3 Reasons Why iPhone Won’t Cripple Verizon’s Network

Verizon Wireless (s vz) is widely expected to announce a version of the Apple (s aapl) iPhone for Verizon customers tomorrow, ending more than three years of official U.S. iPhone exclusivity on AT&T (s t). We’ll be on-hand at the Verizon press conference to cover the phone and plan pricing details, but today the media is left to speculate on how Verizon’s network is expected to the handle the potential onslaught of iPhones on its CDMA wireless network. Three things tell me that Verizon is up to the challenge.

Unlike AT&T, Verizon Won’t Be Surprised By Data Demand

Advertisement

When the original iPhone launched on AT&T in 2007, the carrier wasn’t quite prepared for the data demand Apple’s handset would bring. As Stacey’s in-depth GigaOM Pro report (subscription required) on the topic suggests, AT&T witnessed a 5,000 percent increase in network data demand from 2007 to 2010, largely due to iPhone adoption. The carrier invested $19 billion in wireless network upgrades between the beginning of 2008 — just before the download-heavy iTunes App Store and 3G iPhone version launched — and the third quarter of 2009. But U.S. smartphone adoption is rising fast among consumers as are iPhone sales, which hit a record 14.1 million units last quarter. As a result, in some regions of the country, AT&T’s network capacity is still outpaced by such growing demand.

To say that AT&T was unprepared for the data demand brought by iPhone and other handsets is probably an understatement. In contrast, Verizon has had several years without an iPhone to prepare for life with an iPhone. Without an iPhone, Verizon turned to a portfolio filled with high-performance Android (s goog) devices such as the Motorola Droid (s mmi), Droid X, HTC Incredible and Samsung Fascinate, to name a few. And these Android handsets complement a large contingent of BlackBerry smartphones sold by Verizon as well; although the rate is declining, more than an estimated 20 percent of Verizon smartphone sales are still BlackBerry (s rimm). The network is already working just fine with millions of smartphones, so why would it be crushed with the addition of the iPhone?

AT&T even shared some iPhone data use statistics in a round about way when it moved from unlimited smartphone plans last year to buckets of data. Back in June, the carrier said the new plans were based on statistics showing that 65 percent of their smartphone users consume 250 MB or less of 3G data while 98 percent use less than 2 gigabytes. Compare that to T-Mobile, another Android-heavy portfolio, who said at CES last week that HSPA+ smartphones on its network — nearly all of which are Android devices — are eating up nearly one gigabyte of monthly data on average. Granted, these aren’t exact comparisons, especially when six months have passed (and more consumers bought smartphones) between AT&T’s data point and T-Mobile’s, but it illustrates a general trend on data use.

Android devices, which are among the top-sellers in Verizon stores, are shown to use more data than iPhones, yet the network is handling them. Heck, if current Verizon Android owners switch to an iPhone, Verizon could actually reduce overall data demand on a per handset basis. It may sound counter-intuitive, but for every Verizon customer switching from Android to iPhone, the trend so far shows potential that these customers are likely to use less data on their smartphone.

The Transition to LTE Has Begun

No, I don’t expect an iPhone capable of using Verizon’s speedy new LTE network tomorrow, but the LTE network will indirectly help Verizon handle iPhone data. Last week at CES, Verizon announced four new high-end handsets that are compatible with LTE; Morotola, LG, Samsung and HTC are the vendors for these devices. I spent time with each of them, and they’re all impressive with dual-core processors, 4.3-inch high-resolution displays and, of course, access to the fast LTE data network.

These handsets will all launch in the first half of this year, and based on my conversations with Verizon, the HTC Thunderbolt is likely to be the first. Pending the pricing, which isn’t yet set on any of these devices, I can easily see combined sales of several million in the first half of 2011, even as some consumers will opt for an iPhone. Sure there’s pent-up demand for a Verizon iPhone, but consumers that live in one of the 38 LTE markets may opt for a new Android device, and Verizon plans to add 140 additional LTE markets by the end of this year.

That means a fair number of LTE handsets will be sold where there’s LTE service in 2011. None of those LTE handsets will be hitting Verizon’s 3G network, except for when the handset moves out of an LTE coverage zone. In that case, the devices will fallback to Verizon’s 3G data network. Essentially, Verizon is adding the iPhone at a perfect time, because it will be reducing 3G data demand with its planned LTE rollout strategy. Indeed, I wonder if Verizon timed the LTE rollout to somewhat coincide with its iPhone plans for this very reason. Given Apple’s yearly refresh cycle for the iPhone, it’s possible that this summer brings an LTE-capable iPhone as well, although I put the odds at 50-50.

A Tale of Two Networks and Their Data Plans

To sum it up then, what was a perfect storm for Apple’s iPhone to wreak havoc on AT&T’s network for the last three years is now a potential recipe for success on Verizon. To its credit, AT&T has poured money into its network to keep iPhones from becoming bricks. But Verizon’s measured approach and demonstrated success in handling heavy smartphone users combined with a totally separate data network for the future means that a Verizon iPhone ought to work on the web just as well as any other Verizon smartphone today.

When I spoke directly with Verizon at CES last week, they weren’t sharing details on price nor availability. However, they did say that they were looking at keeping plans the same as for the 3G phones, with the caveat that they’d be evaluating them over time.

Finally someone gets it. The wisdom by most has been “just wait until Verizon gets the iPhone. Verizon’s network will suck too”. That is just not the truth. When the iPhone first came out, Verizon had a better network. I bought the iPhone, walked out of the store and lost the signal within two minutes of driving. I stopes 1 in 5 calls and the data was slow. Then I switched to Verizon…..may I say night and day difference in user experience.

Thinking the iPhone won’t cripple Verizon is foolish. By comparison here where I live 1 out of 10 smart-phones is a droid on verizon (Still counting other networks, so what I’m saying is not a lot of people use Verizon) same goes for Blackberry and Nokia. The iPhone has been the most successful smart-phone ever and hearing all the speculation about how Verizon is so much better than AT&T everyone will be switching to the Verizon iPhone. Now what I predict (which is probably wrong) the enormous wave of data coming from the iPhone alone will be enough to shut Verizon down making me laugh until I cough up a lung.

Great article. I thought the same thing about LTE taking the load off the 3G network because of early adopters being data hogs. I’m anxious to see the data plans. As a dual wielding cell phone junkie, Verizon has about 1000 kbps up with AT&T getting 3-5000 kbps up.

Exactly: who is a more likely “data hog”: a new smartphone user or the experienced user that knows / leverages all the features, tethering, etc… I’d go with the early adopters. ;) Early word on the data plans is that they’ll be the same as currently offered for other Verizon smartphones.

All valid points. But fundamentally Verizon Wireless users will not see the issues seen in the ATT network where voice service went downhill completely because of the difference in their wireless technologies : GSM/UMTS vs CDMA.

Simply put – in Verizon’s network the voice and data networks are completely separate. So no matter how much of a load builds up on the data network, the voice network is not effected. So you won’t see the issues like ATT where you see 5 bars but can’t get connected because of an overload of data users etc.

Years ago this was a big deal in the wireless standards bodies with people fighting about this endlessly. The method chosen by Verizon was deemed the loser .. but now it seems it has become an advantage. Funny how life turns out.

Spot on point, and thanks for bringing it up! At some point in the future though, that advantage will be lost as Verizon moves voice to LTE so voice and data will be on the same network. Should be a gain in spectrum / network efficiency though, which should help mitigate issues.

Nokia and hp are also due to appear on a CDMA service soon. Probability statistics would rule out an iPhone on Verizon this year as no domestic carrier has circumvented AT&T and Apple’s 5 year exclusivity agreement that won’t expire until 2012. An iPad 2 is the most and least likely to come from Apple. Another likely offering would be a CDMA/LTE enabled Mac Book Air. The Wall Street Journal keeps fanning flames over a non-existent fire that never got officially ignited about a Verizon iPhone in 2008, 2009, 2010, and now 2011, and you people keep re-writing it as if its a fact. Stretch your own minds for once. Verizon’s announcement could have nothing to do at all with Apple. Has everyone forgotten that there is no Windows Phone device currently on Verizon and no Nokia or new webOS smartphones? Each are due for CDMA this year but everyone is gunning unwarranted for something that contractually cannot be. Grow up and let patience be the force. The conference may shut everyone down. That’d make a great humble pie for the entire blogosphere that isn’t questioning the validity of a often repeated Wall Street Journal article. The blogosphere should see the documentary “War Made Easy” before ever writing again. Wonderful explanation about media perception, deception, and collusion with change agents to obfuscate facts before presentation to stakeholders.

Most of the post isn’t about “if” a Verizon iPhone will appear, but how it will affect the network “when” it appears, so I’m not sure why 95% of your comment is around Verizon not getting the iPhone, a Nokia CDMA device and new webOS phones. Sorta lost me here…. sorry.

Probably worth noting an official AT&T PR statement today too: “The iPhone is built for speed, but that’s not what you get with a CDMA phone. I’m not sure iPhone users are ready for life in the slow lane.”

Think that statement was just random timing? Possible, but not likely. We’ll find out tomorrow for sure.

Very unlikely. A Windows Phone and/or iPad 2 are more likely. Either way, “if” an iPhone gets onto Verizon by 2012, it may not count enough to warrant these types of articles anymore as data WILL be capped on the 4G level, which is where the demand will be. Sprint’s scarce data users fail to hit 5GB per month because they accessing that much material on a mobile device sucks over a 3G speed. An LTE speed would be nice if it were unlimited, but Verizon’s alleged plans and prices make it difficult to hope for “anytime, anywhere” data accessibility uninhibited by caps. This will soften the initial rushed adoption that is bound to happen. But when reality sets in, and users get pissed off with facing a 14 day trial period as opposed to at least one month and a $350 ETF, the value proposition plummets every billing cycle.